ARBITRATION: IS IT CONSTITUTIONAL?

Dec 5, 1999

This question of settling civil lawsuits without a jury will eventually
be decided by the U.S. Supreme Court

By DAVID G. WIRTES JR.

You probably have personally experienced the creeping advance of the use
by sellers and lenders of mandatory and binding arbitration provisions
in consumer contracts.

Today in Alabama, it is virtually impossible to purchase or lease a major
consumer item, such as a new automobile, mobile home or household appliance
without the seller or lender insisting that in the event of a dispute,
the consumer has no recourse but to resort to arbitration.

Unfortunately, the sellers and lenders virtually always bury the arbitration
provision in boilerplate and legalese so that the consumer knows nothing
of the important rights he is giving away. Equally troubling, while the
sellers and lenders insist that the consumer resort to unfair arbitration
in the event of any dispute, the sellers and lenders reserve for themselves
the absolute right to invoke the judicial process should a dispute arise
from their point of view.

Several of the more important considerations that weigh heavily against
mandatory and binding arbitration include:

No accountability: Unlike judges who are subject to regulation by the
Judicial Inquiry Commission, lawyers who are subject to the regulation
by the State Bar Association and politicians who are subject to regulation
by the Ethics Commission, arbitrators may do to you whatever they want
to do, and they have no one to answer to for it.

It is too expensive: The costs of arbitration increase with the size of
the controversy. For example, according to the American Arbitration Association's
Construction Industry's Dispute Rules, a controversy over a $50,000
house would cost the homeowner $1,250 just to file a claim for arbitration.
A controversy of a $300,000 dollar house would cost the homeowner $3,500.
Under our traditional system of filing suit in state court, on the other
hand, a controversy involving amounts up to $10,000 requires a payment
of only a filing fee of $115; controversies exceeding $10,000 require
payment of a filing fee of $207.

In addition to the money which must be sent to the American Arbitration
Association (and other, similar bodies) just to invoke the arbitration
process, the consumer is also stuck with paying the arbitrators expenses
(which is ordinarily a steep hourly rate) and the costs associated with
providing the place within which to conduct the arbitration hearing (such
as a hotel conference room).

No time-tested Rules: Under our historical civil justice system, the citizens
know that there are strict rules that must be adhered to. The rules of
evidence, rules of civil procedure, rules of professional conduct and
local court rules all provide very clear guidance of how lawyers and parties
must while resolving controversies. For example, if in a medical negligence
case a hospital refuses to turn over medical records, the patients attorney
can obtain an order from the court requiring the records be produced under
threat of severe sanctions should the hospital not do as ordered. In arbitration
proceedings, on the other hand, there is no enforcement tool to protect
the victim or make wrongdoers do the right thing.

Unfair forum: When was the last time you heard of an ordinary citizen
signing up to become an arbitrator? How many truck drivers, postal workers,
housewives, school teachers or other working men or women do you know
are certified arbitrators? What chance will you have to prevail with your
controversy when Mr. or Mrs. Ordinary Citizen is being judged by those
who have sought jobs as certified arbitrators, such as insurance industry
executives, retired building contractors, corporate attorneys and the like?

Due Process: Our country's civil justice system has developed over
200 years. In that time, thousands upon thousands of cases have been heard
and decided, and from that collective experience the important fabric
of our nation's laws has emerged. Included among those laws are important
due process protections which spell out the rights and obligations of
each of our citizens.

Nothing in the arbitration rules requires the arbitrator to adhere to
our basic rules of law. To the contrary, arbitrators are free to disregard
them. What's more, many arbitrators have not training in law and would
not know how to correctly enforce the rights and obligations, assuming
they were inclined to do so.

History: Finally, and most important, we must consider how this new movement
toward arbitration runs afoul of the basic, fundamental liberties entrusted
to us by our Founding Fathers. The Bill of Rights sets out the Seventh
Amendment that we have the right to trial by jury. In Alabama, our forefathers
preserved the sacred right through Article 1, Section 11 of our Constitution,
which reads: "The right to trial by jury shall remain inviolate."
Thousands of heroic men and women have sacrificed their lives to protect
these rights and privileges.

Now, however, those rights are being taken away from each of us without
so much as a fight. Is it our legacy to give away what our ancestors fought
valiantly to provide for us?

We are seeing arbitration provisions surreptitiously inserted into base
customers' depositor's agreements, bill-stuffers received from
credit card companies, insurance policy renewal data, and the like. You
cannot buy a new car or truck in Alabama today without having to sign
an arbitration agreement because the Alabama Automobile Dealers Association
got all the new car and truck dealers together to agree to do this on
a state-wide basis.

Incredibly, the same organization is now howling in protest over the insistence
by the new car manufacturers that the dealers sign arbitration agreements.
The dealers' lobbyists have even sought special protective legislation
in Congress to protect themselves from the harshness and unfairness of
arbitration. It is the height of hypocrisy for those dealers to complain
about having to sign an arbitration agreement with the manufacturers,
but then to turn around and insist that the citizens sight an arbitration
agreement with them.

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